Series 6 Exam Preparation: Comprehensive Questions and Verified Answers, Exams of Nursing

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On the 2-year anniversary of their registration and every 3 years thereafter. - CORRECT ANSWERS When must RRs complete the Regulatory Element of Continuing Education? True - CORRECT ANSWERS True or False: Firm Element Continuing Education requires BDs to update employees on job and product-related subjects. U4 - CORRECT ANSWERS To apply for a securities license, one must file Form _____ with FINRA. Action (buy/sell), Amount (quantity), and Asset (security) - CORRECT ANSWERS What three items must be specified on a not held order A not held order will be considered a day order. - CORRECT ANSWERS For how long may a not held order be maintained? The Trust Indenture Act of 1939 regulates corporate bond offerings (NOT municipal or government offerings). - CORRECT ANSWERS The Trust Indenture Act of 1939 regulates ________________ offerings. state and local tax. - CORRECT ANSWERS Though subject to federal tax, interest on Treasuries is exempt from ________ and ________ tax. True. The interest is taxed at the federal, state, and local level. - CORRECT ANSWERS True or False: Interest paid on GNMA, FNMA, FHLMC, and SLMA agency bonds is fully taxable to investors. new issues. - CORRECT ANSWERS The Securities Act of 1933 regulates _____________. Provide investors with full and fair disclosure regarding new issues (prospectus) - CORRECT ANSWERS What is the primary purpose of the Securities Act of 1933?

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False - CORRECT ANSWERS True or False: The SEC judges an offering's investment merit and provides approval. Government/municipal bonds, commercial paper, bankers' acceptances, bank issues, non- profit and small business issues - CORRECT ANSWERS List the securities that are exempt from registration. anti-fraud - CORRECT ANSWERS Though some securities are exempt from registration, nothing is exempt from the ____________ provisions of the Act. 35 is the maximum number of non-accredited investors allowed in a Private Placement. - CORRECT ANSWERS ____ is the maximum number of non-accredited investors allowed in a Private Placement. Yes, so potential purchasers can provide indications of interest. - CORRECT ANSWERS May a preliminary prospectus (red herring) be sent during the cooling-off period? non-binding - CORRECT ANSWERS Indications of interest are _______________ on both the customer and BD. Return the check to the customer - CORRECT ANSWERS What should an RR do if a client sends a check to purchase securities going through the cooling-off period? True - CORRECT ANSWERS True or False: If a registration statement has not been filed with the SEC, BDs may not discuss new issue information. final offering price - CORRECT ANSWERS The ____________________ will not appear in a red herring.

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Blue-Sky Laws - CORRECT ANSWERS What rules govern the registration of an issue in any state in which it will be offered? true - CORRECT ANSWERS True or False: Blue-Sky Laws apply to broker-dealers and agents operating within a state. the syndicate. - CORRECT ANSWERS In a firm commitment underwriting, unsold securities are retained by ________________. the issuer - CORRECT ANSWERS In a best-efforts underwriting, unsold securities are retained by ______________. All-or-None - CORRECT ANSWERS What type of underwriting is cancelled if the entire issue is not sold? Mini-max - CORRECT ANSWERS What type of underwriting is cancelled if a specified portion is not sold? Stand-by - CORRECT ANSWERS A ___________ underwriting is used for shares not purchased through a rights offering. Stabilization - CORRECT ANSWERS ____________ is the only form of price manipulation allowed by the SEC. False. Stabilization is designed to support or keep a new issue's price from falling. - CORRECT ANSWERS True or False: Stabilization is designed to artificially raise the price of a new issue. public offering price (POP). - CORRECT ANSWERS The highest price at which a stabilizing bid may be placed is the ________________________.

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It calls attention to the new issuance of securities and members of the syndicate. - CORRECT ANSWERS What is the purpose of a Tombstone Ad? What is the purpose of a Tombstone Ad? - CORRECT ANSWERS It calls attention to the new issuance of securities and members of the syndicate. Secondary Market - CORRECT ANSWERS The Securities Exchange Act of 1934 regulates the ____________________. The Securities and Exchange Commission (SEC) - CORRECT ANSWERS What U.S. Government agency, created by the '34 Act, enforces securities laws? Officers, directors, partners, greater than 10% owners, and immediate family members of all listed - CORRECT ANSWERS Define an insider. insider trading - CORRECT ANSWERS Trading on material, non-public information is considered __________________. Yes. Both parties, the tipper (officer) and the tippee (the son), have violated the Insider Trading Act. - CORRECT ANSWERS A corporate officer informs his son of an upcoming earnings report and the son effects trades. Is this a violation? The criminal penalties for insider trading by individuals is a maximum of $5 million and/or 20 years in prison. - CORRECT ANSWERS The criminal penalties for insider trading by individuals is a maximum of $____________ and/or ____ years in prison The civil penalty for insider trading, which is three times the profit made or loss avoided - CORRECT ANSWERS What are treble damages? $25 million per violation - CORRECT ANSWERS What is the criminal penalty for insider trading by corporations?

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Public school employees [403(b)] and certain non-profit organization employees [501(c)3] - CORRECT ANSWERS Who is eligible to contribute to a qualified annuity? 100% of earned income up to $5,000 is the maximum contribution to an IRA. - CORRECT ANSWERS ____% of earned income up to $_______ is the maximum contribution to an IRA. For anyone 50 or older, an additional $1,000 is allowed, making the maximum contribution $6,000 - CORRECT ANSWERS If Joe is 55 years old, how much could he contribute to his IRA? 5,000 - CORRECT ANSWERS A contribution of $_______ can be made to a Spousal IRA for a non-working spouse. 6% of the excess - CORRECT ANSWERS What is the penalty for making excess contributions to an IRA? False. Excess contributions are non-deductible and will not grow on a tax-deferred basis. - CORRECT ANSWERS True or False: Excess contributions made to an IRA will still be deductible and will grow tax-deferred. Cash - CORRECT ANSWERS IRA contributions must be made in what form Stocks, bonds, mutual funds, and CDs - CORRECT ANSWERS What are some of the acceptable investments for IRA contributions? Collectibles, insurance, and metals (except U.S. gold and silver coins) - CORRECT ANSWERS What are some of the investments that are not suitable for IRA contributions? earned - CORRECT ANSWERS Anyone with __________ income may contribute to an IRA.

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When not covered by an employer-sponsored plan and he is below an adjusted gross income limit. - CORRECT ANSWERS When is an individual (single filer) eligible to make tax- deductible contributions to a Traditional IRA? 60 - CORRECT ANSWERS Rollovers must be completed within ____ days. 12 - CORRECT ANSWERS Only one rollover is allowed per rolling ____ months. 10 - CORRECT ANSWERS There is a ____% penalty for early withdrawals from an IRA. true - CORRECT ANSWERS True or False: To avoid a late withdrawal penalty, IRAs have a required minimum distribution (RMD) provision By April 1st of the year after an individual turns age 70 1/2 - CORRECT ANSWERS When must IRA withdrawals begin in order to avoid the late withdrawal penalty? 50% of the amount that should have been taken (an actuarial amount - CORRECT ANSWERS What is the late withdrawal penalty? The Roth IRA contribution is always made on an after-tax basis. - CORRECT ANSWERS How is a Roth IRA contribution different from a Traditional IRA contribution? If all contributions were deductible, then the entire withdrawal is taxed as ordinary income. - CORRECT ANSWERS How are withdrawals from a Traditional IRA treated for tax purposes? Withdrawals will be tax-free if the account is open for at least 5 years and is not considered an early withdrawal - CORRECT ANSWERS How are withdrawals from a Roth IRA treated for tax purposes?

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Death, disability, qualified higher education expenses, or first-time home buyer ($10, limit) - CORRECT ANSWERS Early withdrawal without penalty is allowed for what reasons? private pension - CORRECT ANSWERS ERISA gave the U.S. Government jurisdiction over ___________________ plans. Yes. The plan's trustee must abide by the Uniform Prudent Investor Act. - CORRECT ANSWERS According to ERISA, are there any standards that must be followed regarding how money is invested? yes - CORRECT ANSWERS Does ERISA permit the writing of covered calls in retirement plans? Employees who are 21 years or older with one year of full-time service - CORRECT ANSWERS Describe the employees who must be eligible to contribute to an ERISA qualified plan. Keogh Plans and SEPs - CORRECT ANSWERS What retirement plans are available to the self- employed self-employment - CORRECT ANSWERS Contributions to a Keogh plan are solely based on _________________ income. Yes, provided the Keogh contribution is solely based upon the employee's self-employment income - CORRECT ANSWERS May an employee of a corporation who contributes to a corporate pension plan also contribute to a Keogh plan Yes, but since the Keogh is a qualified plan, the IRA contributions may not be tax-deductible.

• CORRECT ANSWERS May an individual with a Keogh Plan also fund an IRA? 529 - CORRECT ANSWERS _____ Plans are college savings plans with high contribution limits set by the state sponsor.

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They are after-tax contributions that may possibly grow tax-free. - CORRECT ANSWERS Describe the tax treatment of contributions made to a 529 Plan. True ($13,000 x 5 years) - CORRECT ANSWERS True or False: 529 Plans allow for a 5-year front-end contribution of $65,000, which avoids gift tax. Front-loading 5 years of contributions is allowed; therefore, each could contribute $65, for a total of $130,000. - CORRECT ANSWERS Grandparents contributing to a grandchild's 529 Plan may give how much money and still avoid gift tax consequences? Coverdell Education Savings Plan. - CORRECT ANSWERS A savings plan which funds both elementary and higher education is referred to as the ____________________________. An after-tax contribution of $2,000 is allowed per year. - CORRECT ANSWERS How much may be contributed to a Coverdell each year? The Education IRA (Coverdell) - CORRECT ANSWERS Is it a 529 Plan or Education IRA that imposes income limitation on the contributors? The earnings would be subject to ordinary income tax plus a 10% penalty. - CORRECT ANSWERS In a 529 Plan, what happens if the funds are withdrawn, but not used for qualified education expenses? yes - CORRECT ANSWERS If not needed for a child's education, may the funds in a 529 Plan be transferred to a relative's 529 Plan? The employee's individual SEP-IRA - CORRECT ANSWERS For employers with SEP Plans, where are the contributions they make for their employees directed?

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The right an employee gradually acquires by length of service at a company to receive employer-contributed benefits - CORRECT ANSWERS Define vesting. True. A scale would indicate how long an employee must remain with the employer to be fully vested. - CORRECT ANSWERS True or False: Keogh plans follow a vesting schedule true - CORRECT ANSWERS True or False: SEPs require employees to become immediately vested in the full amount contributed A contribution at the same percentage must be made for the employee. - CORRECT ANSWERS If an employer makes a Keogh contribution on its own behalf, what must be done for its employees? False - CORRECT ANSWERS True or False: If a mutual fund investor chooses to reinvest dividends, taxes will be deferred True. Regulated Investment Companies will only be taxed on the income retained. - CORRECT ANSWERS True or False: Regulated Investment Companies (under Subchapter M) may relieve their burden of paying tax on income. The fund must be a domestic company that distributes at least 90% of its net investment income - CORRECT ANSWERS What are the requirements for being considered a Regulated Investment Company? shareholders. - CORRECT ANSWERS A Regulated Investment Company's net investment income will ultimately be taxed to the __________________. The fund's holding period is used to determine whether long-term or short-term. - CORRECT ANSWERS When a fund distributes a capital gain, is it the fund's or shareholder's holding period that is considered?

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As a long-term capital gain, since the fund held the shares for three years. Joe's holding period is irrelevant. - CORRECT ANSWERS A fund distributes a gain on shares held for 3 yrs. Joe has owned the fund shares for 6 months. How is Joe's gain taxed? Qualified - CORRECT ANSWERS Which annuity allows for a pre-tax contribution - Qualified or Non-Qualified? Non-Qualified - CORRECT ANSWERS Which annuity is funded with after-tax dollars - Qualified or Non-Qualified? Only the earnings portion is subject to tax as ordinary income - CORRECT ANSWERS In a Non-Qualified Annuity, how is the payout taxed? Fully taxable (taxed at the federal, state, and local level) - CORRECT ANSWERS How is interest on corporate bonds treated for tax purposes? Exempt at the state and local level, but subject to federal tax - CORRECT ANSWERS How is interest on Treasuries treated for tax purposes? 15%. - CORRECT ANSWERS Cash dividends received by individuals are generally taxed at a maximum rate of ____%. Her cost basis must be adjusted. - CORRECT ANSWERS What is the tax consequence for an investor who receives a stock dividend? No, not until the stock is actually sold. - CORRECT ANSWERS Does the receipt of a stock dividend create a taxable event? Original cost ÷ new total number of shares ($2,000 ÷ 110 shares = $18.18) - CORRECT ANSWERS Joe owns 100 shares of MNO at $20 (total cost $2,000). If MNO declares a 10% stock dividend, what is Joe's new basis?

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short-term. - CORRECT ANSWERS If an asset was held for one year or less prior to its sale, any gain or loss would be ____________. more than one year - CORRECT ANSWERS For a gain to be considered long-term, the asset must be held for ______________________. Short-term gains are taxed at ordinary income rates, and long-term gains are taxed at a maximum of 15%. - CORRECT ANSWERS What are the capital gains tax rates? They are first used as deductions against capital gains. - CORRECT ANSWERS What is the first use of capital losses? A maximum of $3,000. - CORRECT ANSWERS If there are losses remaining after offsetting gains, what amount may be used against ordinary income? They are carried forward to subsequent years. - CORRECT ANSWERS What happens to losses that remain after offsetting gains and also taking $3,000 against ordinary income? FIFO (first-in, first-out) - CORRECT ANSWERS If not designated by a client at the time of sale, what method will the IRS use to determine which shares were sold? Specific Identification. - CORRECT ANSWERS A client selling shares would like to determine the specific shares being sold, he should use ________________________. FIFO (first-in, first-out) - CORRECT ANSWERS If an investor does not use Specific Identification when selling securities, the IRS assumes __________________. 30 days of the sale. - CORRECT ANSWERS A sale for a loss would trigger the wash sale rule if the same security is repurchased within ____________________.

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The sale of an asset at a price that exceeds its basis (gain) or at a price lower than its basis (loss) - CORRECT ANSWERS What generates a capital gain or loss? Same stock, rights, warrants, a bond or preferred stock convertible into the stock, or the purchase of a call option - CORRECT ANSWERS According to the wash sale rule, what securities are considered substantially the same? $40 + 5 point loss = $45 (The disallowed loss is added to the new purchase.) - CORRECT ANSWERS Joe sells XYZ and claims a 5-point loss, but triggers the wash sale by repurchasing XYZ at $40. Joe's cost basis is: yes - CORRECT ANSWERS Is a gift of $13,000 per person, per year, exempt from gift tax? yes - CORRECT ANSWERS Is a gift of $26,000 per married couple, per year, exempt from gift tax? An unlimited amount - CORRECT ANSWERS How large can a gift be between spouses and remain exempt from the gift tax? graduated - CORRECT ANSWERS Progressive taxes are also referred to as ____________ taxes. flat - CORRECT ANSWERS Regressive taxes are also referred to as _______ taxes. progressive or graduated tax. - CORRECT ANSWERS Income or estate tax is an example of a _______________________ tax. regressive or flat - CORRECT ANSWERS Sales tax is an example of a _____________________ tax.

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The total cost to acquire an asset - CORRECT ANSWERS Define the term basis. No, it is a tax-free exchange. The taxable event would occur when the stock is sold. - CORRECT ANSWERS Is the conversion of a bond a taxable event? long-term - CORRECT ANSWERS If securities are inherited, a beneficiary's holding period is automatically ____________. His basis is the market value at the time of his grandfather's death (stepped up basis). - CORRECT ANSWERS Pete just inherited securities from his grandfather and is asking about his basis. What is the correct response to Pete? Basis will be the donor's cost or market value, whichever is lower. - CORRECT ANSWERS How is basis determined for the recipient of gifted securities? the same as the donor's - CORRECT ANSWERS When securities are gifted, the recipient's holding period will be _______________________. Maintain fair and orderly securities markets and establish rules and regulations for protecting investors - CORRECT ANSWERS What is the role of an SRO? The Financial Industry Regulatory Authority (FINRA) is the SRO for the OTC market. - CORRECT ANSWERS The __________________________________________ is the SRO for the OTC market. principal/dealer - CORRECT ANSWERS Underwriters that have made a firm commitment to an issuer are acting in a ________________ capacity

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agency/broker - CORRECT ANSWERS Underwriters operating under a best-efforts agreement with an issuer are acting in a ________________ capacity. Syndicate members assume liability, while firms in the selling group do not. - CORRECT ANSWERS What is the difference between a syndicate member and a firm in the selling group? The SEC can sue for three times the damage (profit made or loss avoided). - CORRECT ANSWERS "For insider trading violations, the SEC can sue for treble damages." What does that statement mean? Her basis is zero, since the annuity is qualified (funded pre-tax) and the entire $22,000 is taxed as ordinary income. - CORRECT ANSWERS Joan invests $15,000 in a qualified annuity. At age 64, she withdraws all $22,000. What's Joan's basis; what's taxed? Her basis is $15,000 since the annuity is funded after-tax and the $7,000 of earnings would be taxed as ordinary income. - CORRECT ANSWERS Ann invests $15,000 in a non-qualified annuity. At age 64, she withdraws all $22,000. What's Ann's basis; what's taxed? ends/ceases. - CORRECT ANSWERS A BD must file Form U5 with FINRA when a person's association with that firm ______________. Conviction for any felony or securities-related misdemeanor within the last 10 years - CORRECT ANSWERS What are the justifiable reasons for denying an individual's registration? The formula is: Taxable Yield x (100% - Tax Bracket %). 8.5 x 72% = 6.12%. - CORRECT ANSWERS What is the net yield for an investor in the 28% tax bracket who owns an 8.5% corporate bond? 59 1/2, - CORRECT ANSWERS When an individual reaches age ______, they may begin withdrawing from an IRA without penalty

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Employees of state and local governments - CORRECT ANSWERS Who uses 457 Plans? Accredited investors have net worth of at least $1,000,000 or pre-tax income in each of the last two years of $200,000. - CORRECT ANSWERS Accredited investors have net worth of at least $_________ or pre-tax income in each of the last two years of $________. False. Participation in firm element CE is an annual requirement. - CORRECT ANSWERS True or False: Firm Element CE must be completed every three years after initial qualification. 30 - CORRECT ANSWERS If a trainee fails his Series 6 examination on the first attempt, he must wait _____ days to re-test 6 - CORRECT ANSWERS If a trainee fails his Series 6 examination on the third attempt, he must wait _____ months to re-test. FINRA maintains information regarding RRs on the CRD (Central Registration Depository) system - CORRECT ANSWERS FINRA maintains information regarding RRs on the _______ system 2 years - CORRECT ANSWERS For how long may an RR leave the financial services industry without having to requalify? Broker-Dealer (BD). - CORRECT ANSWERS An RR's employer is referred to as a ________________. Only if the product is being sold in a primary (new issue) distribution. - CORRECT ANSWERS May a Series 6 registered person engage in the sale of closed-end funds?

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No. Series 6 RRs may only sell packaged products, such as mutual funds and annuities. - CORRECT ANSWERS May a Series 6 registered person engage in the sale of individual stocks or bonds? The Uniform Securities Act, also known as the blue-sky laws - CORRECT ANSWERS As it relates to securities law, what does the acronym USA mean? Yes, provided participants have the ability to have questions answered on a timely basis. - CORRECT ANSWERS May a firm conduct its annual compliance meeting via webcast? There is no penalty, since Roth IRAs do not have RMDs. - CORRECT ANSWERS Hank is a 71- year-old who has a Roth IRA. What penalty is assessed if Hank has failed to begin taking distributions? Yes, provided she has earned income - CORRECT ANSWERS May an 85-year-old continue to contribute to a Roth IRA? $0, since he has no earned income - CORRECT ANSWERS What is the maximum annual IRA contribution for a 58-year-old who only has investment income? $0, since the couple's income exceeds the income threshold - CORRECT ANSWERS How much may a married couple earning $325,000 contribute to a Roth IRA? $0, since these plans are typically funded pre-tax. - CORRECT ANSWERS What is the typical cost basis for a participant in a qualified retirement plan? ordinary income - CORRECT ANSWERS Distributions from a qualified plan are taxed at __________________ rates. Yes. Clients may choose to invest either in-state or out-of-state. - CORRECT ANSWERS May clients invest in an out-of-state 529 plan?

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One that distributes at least 90% of its net investment income - CORRECT ANSWERS What is a regulated investment company? yes - CORRECT ANSWERS Is a mutual fund switch a taxable event? Earnings first (LIFO) - CORRECT ANSWERS In an non-qualified annuity, how is a single distribution taxed? A 1035 Exchange - CORRECT ANSWERS What technique can be used to roll assets from one annuity into another without taxation? No - CORRECT ANSWERS Is switching between annuity sub-accounts taxable? Tax-free, since it is part of the client's basis - CORRECT ANSWERS In a non-qualified annuity, how is a return of capital taxed? 7 days - CORRECT ANSWERS What is the SEC-mandated period for advertising the yield of a money market fund? 30 days - CORRECT ANSWERS What is the SEC-mandated period for advertising the yield of a bond fund? 1, 5, and 10 years - CORRECT ANSWERS What periods must be covered in mutual fund performance advertising? Three years (but easily accessible for the first 2 years) - CORRECT ANSWERS For how long must mutual fund advertisements be kept on file?

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No. Independently prepared reprints need not be filed, but must be approved by a principal.

• CORRECT ANSWERS Must a photocopied magazine article on mutual fund investing be filed with FINRA? Yes. The donor is not required to be a parent - CORRECT ANSWERS May an aunt set up a 529 plan for her niece? False. Unrealized gains (paper profits) are not taxable. - CORRECT ANSWERS True or False: Unrealized gains in a mutual fund are taxable yes - CORRECT ANSWERS May a person contribute to her own 529 plan? No, but variable annuities would be subject to the penalty. - CORRECT ANSWERS Are variable life policies subject to IRS early withdrawal penalties? April 1 of the following year - CORRECT ANSWERS John turns age 70 1/2 in December. When must he begin the RMD from his IRA? The penalty is waived, however, taxes are still levied. - CORRECT ANSWERS What is waived for a first-time homebuyer in the event of an IRA distribution? No. This is prohibited. - CORRECT ANSWERS May a firm advertise a hedge fund being offered through a Reg. D private placement to the general public? No. There are no income limits imposed for these plans. - CORRECT ANSWERS Is there an income threshold for 529 College Savings Plan contributors? No - CORRECT ANSWERS May a Series 6 registered person engage in option trades?

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The Securities Exchange Act of 1934 - CORRECT ANSWERS Which federal law created the SEC? The Securities Exchange Act of 1934 - CORRECT ANSWERS Which federal law governs the registration of RRs and their firms? The Securities Act of 1933 - CORRECT ANSWERS Which federal law governs the registration of new issues? No. CMOs are corporate securities that must be registered. - CORRECT ANSWERS Are CMOs exempt from registration under the Securities Act of 1933? A firm-commitment offering. In a firm-commitment, the BD is acting as a principal. - CORRECT ANSWERS A financial commitment is made in which type of underwriting? She may state that she is registered with FINRA. Remember that registration does not imply expertise. - CORRECT ANSWERS What may an RR say upon passing her Series 6 exam? False. They are considered unearned income. Wages, salary, and tips are earned income. - CORRECT ANSWERS True or False: Interest and dividends are considered earned income. A section of the IRS Code that defines regulated investment companies (conduit/pipeline theory). - CORRECT ANSWERS What is Subchapter M? employer - CORRECT ANSWERS The ___________ bears the investment risk in a defined benefit plan. employee - CORRECT ANSWERS The ___________ bears the investment risk in a defined contribution plan.

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primary - CORRECT ANSWERS The new issue market is also known as the __________ market. Savings Incentive Match Plans for Employees - CORRECT ANSWERS Identify the acronym: SIMPLE Alternative Minimum Tax - CORRECT ANSWERS Identify the acronym: AMT Variable Life Insurance - CORRECT ANSWERS Identify the acronym: VLI Tax-Sheltered Annuity (a qualified contract) - CORRECT ANSWERS Identify the acronym: TSA Central Registration Depository - CORRECT ANSWERS Identify the acronym: CRD Registered Representative - CORRECT ANSWERS Identify the acronym: RR Self-Regulatory Organization (such as FINRA) - CORRECT ANSWERS Identify the acronym: SRO Securities and Exchange Commission - CORRECT ANSWERS Identify the acronym: SEC Required Minimum Distribution (only required of Traditional IRAs) - CORRECT ANSWERS Identify the acronym: RMD Tax-free to the recipient, but any amount in excess of $13,000 per year is taxable to the donor - CORRECT ANSWERS What is the tax implication of a person-to-person gift of $100,000?

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The loan is not taxed, but interest is charged on the outstanding balance. - CORRECT ANSWERS What is the tax implication of a policy loan on a life insurance policy? Any amount above the contract's basis is taxable to the beneficiary. - CORRECT ANSWERS What is the tax implication of the death benefit on a variable annuity? No. Disclosure of exam content may invalidate the result. - CORRECT ANSWERS May an RR disclose Series 6 examination content to his supervisor? 1099 - CORRECT ANSWERS A mutual fund shareholder's tax liability is reported on Form _______. $3,000. Any remaining balance must be carried forward. - CORRECT ANSWERS What is the maximum annual tax loss that may used against ordinary income? Zero. Unrealized losses do not count for tax purposes. - CORRECT ANSWERS Bill has unrealized losses of $10,000. How much may he claim in the current tax year? Yes. Additionally, any amount over the cost basis may be taxable to the beneficiary. - CORRECT ANSWERS Is the death benefit of an annuity included in the estate of a deceased client? No, but the policyholder is charged interest on the loan. - CORRECT ANSWERS Are loans taken against variable life insurance policies taxable? The assets may be combined with those of the surviving spouse. - CORRECT ANSWERS If a spouse dies, what can be done with his IRA assets? The donor - CORRECT ANSWERS Who funds a 529 plan?

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The beneficiary - CORRECT ANSWERS Who receives the benefit from a 529 plan? Public school teachers. Military academy instructors are not eligible. - CORRECT ANSWERS Who is eligible to contribute to a 403(b) plan? Lawyers, accountants, teachers, and engineers provided the advice given is incidental to their profession. (Remember L, A, T, E) - CORRECT ANSWERS Name the four categories of professionals that would not be considered investment advisers? The entire withdrawal is taxed, since these plans are normally funded pre-tax and have a zero cost basis - CORRECT ANSWERS When withdrawing from a qualified plan, how is the distribution taxed? Original investment + reinvested dividends and capital gains - CORRECT ANSWERS What is included in the cost basis of a mutual fund client? Only registered investment advisers. Remember, BDs charge a commission for executing trades, not for advice. - CORRECT ANSWERS Who can charge a client for securities-related advice? $20. The cost basis on a gift is the lower of the purchase price or the current value. - CORRECT ANSWERS A client bought stock at $20 which has appreciated to $25. If the stock is gifted, what is the recipient's cost basis? The RR must report the analyst's disclosure to his manager. This could be a case of insider trading. - CORRECT ANSWERS If an RR receives information about a new company from someone in the research department of his BD, what must be done? The client may begin to receive a series of identical distributions (often called annuitizing an IRA). - CORRECT ANSWERS How may a client avoid the 10% tax penalty on premature distributions from an IRA?

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Individual Retirement Account - CORRECT ANSWERS Identify the acronym: IRA Initial Public Offering - CORRECT ANSWERS Identify the acronym: IPO Investment Company Act of 1940 - CORRECT ANSWERS Identify the acronym: IC Act of '40 Investment Advisers Act of 1940 - CORRECT ANSWERS Identify the acronym: IA Act of '40 The Securities and Exchange Act of 1934 - CORRECT ANSWERS Under which federal law are firms, RRs, and exchanges registered? A large portion (at least 90%) of distributed earnings will be taxed to shareholders, rather than the fund. - CORRECT ANSWERS The conduit/pipeline theory of taxation provides what primary advantage to an investment company? Defined benefit plans make distributions based on factors such as the retiree's tenure, age, and earnings. - CORRECT ANSWERS Which type of retirement plan makes distributions based on a predetermined formula? Last-In, First-Out - CORRECT ANSWERS Identify the acronym: LIFO First-In, First-Out - CORRECT ANSWERS Identify the acronym: FIFO pre - CORRECT ANSWERS A qualified annuity contract or retirement plan is typically funded with _____- tax funds. after - CORRECT ANSWERS A non-qualified annuity contract is typically funded with ______- tax funds.

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2024/2025 BEST COMPLETE EXAM SOLUTION RATED

A+ FOR PASS

Anyone who misuses material non-public information - CORRECT ANSWERS Who is subject to The Insider Trading Act? true - CORRECT ANSWERS True or False: Contributions made to qualified retirement plans are tax-deductible. False. The earnings are tax-deferred. - CORRECT ANSWERS True or False: Earnings generated in a qualified retirement plan are tax-free. They are entirely taxed at ordinary income rates, since these plans have a zero cost basis. - CORRECT ANSWERS What is the tax treatment of the distributions made by qualified retirement plans? False. The contributions are non-deductible. - CORRECT ANSWERS True or False: Contributions made to non-qualified retirement plans are tax-deductible. true - CORRECT ANSWERS True or False: Earnings generated in a non-qualified retirement plan are tax-deferred. Since contributions are made after-tax, only the earnings portion is taxable at ordinary income rates. - CORRECT ANSWERS What is the tax treatment of distributions made by non- qualified retirement plans? At a maximum of 15%, since qualifying dividends receive preferential treatment - CORRECT ANSWERS How are income distributions from a stock mutual fund typically taxed? At ordinary income rates - CORRECT ANSWERS How are income distributions from a bond mutual fund taxed?

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2024/2025 BEST COMPLETE EXAM SOLUTION RATED

A+ FOR PASS

Death or disability of the owner, education expenses, first-time home buyer, or annuitization of distributions - CORRECT ANSWERS What are some of the possibilities for avoiding premature distribution penalties in IRAs? 401(k) plans are used by for-profit employers. (Think traditional corporations.) - CORRECT ANSWERS 401(k) plans are used by _____-profit employers. non - CORRECT ANSWERS 403(b) plans are used by _____-profit employers 457 plans are used by local government employers. (Think municipal workers.) - CORRECT ANSWERS 457 plans are used by ________ government employers FINRA Series 6 or 7 and a state insurance registration - CORRECT ANSWERS In order to sell a variable annuity, what registration(s) is/are required of a registered representative (RR)? Employment Retirement Income Security Act - CORRECT ANSWERS What is ERISA? Simplified Employee Pension Plan - CORRECT ANSWERS Identify the acronym: SEP The entire payout is taxed as ordinary income, since the annuity was funded with pre-tax dollars. - CORRECT ANSWERS In a qualified annuity, how is the payout taxed? No. Death benefits are received tax-free. - CORRECT ANSWERS Are life insurance death benefits taxable? A donor may give up to $13,000 per year and avoid the gift tax. - CORRECT ANSWERS How much may be contributed to a 529 plan and avoid gift tax? 100% of pre-tax income up to $50,000 each year - CORRECT ANSWERS What is the maximum annual contribution for a Keogh Plan?